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ID.me Overstated Jobless Fraud to Win Contracts, House Finds (1)

Nov. 17, 2022, 4:00 PMUpdated: Nov. 17, 2022, 7:00 PM

Tech company ID.me misled US officials and the public about processing delays and the scope of fraud in the unemployment insurance system, and used those claims to secure more government business, a House investigation found.

Early results from Democrats on the House Oversight Committee, released Thursday, show that ID.me’s estimate of $400 billion in fraud from pandemic-related jobless aid relied on figures that didn’t exist when the company first publicized the number. At least 25 state agencies collectively spent nearly $45 million on the company’s facial recognition technology, according to the committee, even though the software potentially blocked “hundreds of thousands” of unemployed Americans from receiving federal help.

Committee Chair Carolyn Maloney (D-N.Y.) said in a statement that she was concerned the company provided “inaccurate information to federal agencies in order to be awarded millions of dollars” in business.

In response to the report, ID.me Chief Communications Officer Terry Neal said in an email that the company has expanded access to government programs for disadvantaged Americans and noted that even the Department of Labor’s inspector general has said it’s struggled to measure the total amount of fraud.

“ID.me’s claims are supported by multiple additional experts and institutions,” Neal said in the statement. “DOL’s IG has issued multiple reports noting that they have difficulty calculating a national number because many states have not reported the required data.”

The company also said more than 80% of claimants “were able to verify their identity in under 10 minutes,” and that the long wait times for those who required a live agent during the pandemic was due to the volume of claims and antiquated technology in state governments.

“To prepare for any such emergencies in the future, ID.me has invested in personnel and technology to address volume surges,” Neal said.

Tracking Benefits

The cybersecurity company touts itself as a digital gatekeeper for government benefits. It allows officials to confirm virtually that Americans are who they say they are, often using facial-recognition software. Its services became especially attractive to officials in the early days of the pandemic, when in-person government offices closed and state unemployment insurance systems struggled to process a flood of new jobless claims.

US officials have since continued to use its services, albeit with some tweaks. The Internal Revenue Service said in February it would move away from the company’s facial-recognition tool but continue using other ID.me options. The Department of Veterans Affairs decided to keep the software. The agency never used the facial-recognition features, Gary Kunich, a VA spokesman, said in February. ID.me hired hundreds of employees in early 2022 to overcome issues with the facial recognition software and help people who were uncomfortable using it.

The committee’s findings support the results of a Bloomberg investigation in January that reported ID.me’s fraud estimate was overstated. Fraudsters likely stole at least $163 billion in benefits during the pandemic, the Labor Department’s internal watchdog saidseparately in March.

President Joe Biden promised earlier this year that he’d sign an executive order to crack down on identity theft involving public benefits, but hasn’t done so. His Labor Department in September 2021 recommended ID.me, along with competitors TransUnion and LexisNexis, to state unemployment offices looking to crack down on pandemic fraud.

The company’s automated facial-recognition software failed to verify the identities of 10% to 15% of people who used it to apply for unemployment checks, according to the committee. When it sent those individuals to video chat appointments, wait times averaged more than four hours in the 14 states that used the company’s services, the report said.

The company also falsely told the IRS in April 2021 that it had cut wait times to two hours, according to meeting minutes obtained by the committee.

Democrats and advocacy groups earlier this year pressed ID.me over its “performance failures” and storage of biometric information, warning that it has negatively affected state unemployment programs and could be discriminatory.

In response to concerns about the vendor, a Labor Department official pointed to the agency’s work on the government’s own identity verification software. That tool performs better for Americans seeking government benefits than privately owned options such as ID.me, equity advocates said.

Congress increased scrutiny over the jobless aid safety net in the wake of the massive delays and increase in fraud during the pandemic. It gave the DOL $2 billion to help states improve how they pay out benefits.

(Updated with comment from ID.me in paragraphs four through seven.)

To contact the reporters on this story: Courtney Rozen in Washington at crozen@bgov.com; Rebecca Rainey in Washington at rrainey@bloombergindustry.com

To contact the editors responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com; Bernie Kohn at bkohn@bloomberglaw.com